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Friday, September 26, 2014

Paul Krugman: The Show-Off Society

When it comes to the wealthy, is this time different?:

The Show-Off Society, by Paul Krugman, Commentary, NY Times: Liberals talk about circumstances; conservatives talk about character.
This intellectual divide is most obvious when the subject is the persistence of poverty... Liberals focus on the stagnation of real wages and the disappearance of jobs offering middle-class incomes, as well as the constant insecurity that comes with not having reliable jobs or assets. For conservatives, however, it’s all about not trying hard enough. ...
Let us, however, be fair: some conservatives are willing to censure the rich, too. ... Peggy Noonan writes about our “decadent elites”... Charles Murray, whose book “Coming Apart” is mainly about the alleged decay of values among the white working class, also denounces the “unseemliness” of the very rich, with their lavish lifestyles and gigantic houses.
But has there really been an explosion of elite ostentation? ...
I’ve just reread a remarkable article titled “How top executives live,” originally published in Fortune in 1955 and ... it turns out that the lives of an earlier generation’s elite were, indeed, far more restrained, more seemly if you like ... And why had the elite moved away from the ostentation of the past? ... The large yacht, Fortune tells us, “has foundered in the sea of progressive taxation.”
But that sea has since receded. ... And there’s no mystery about what happened to the good-old days of elite restraint. ... Extreme income inequality and low taxes at the top are back. ...
Is there any chance that moral exhortations, appeals to set a better example, might induce the wealthy to stop showing off so much? No.
It’s not just that people who can afford to live large tend to do just that. As Thorstein Veblen told us long ago, in a highly unequal society the wealthy feel obliged to engage in “conspicuous consumption”... And modern social science confirms his insight. For example, researchers at the Federal Reserve have shown that people living in highly unequal neighborhoods are more likely to buy luxury cars... Pretty clearly, high inequality brings a perceived need to spend money in ways that signal status.
The point is that while chiding the rich for their vulgarity may not be as offensive as lecturing the poor on their moral failings, it’s just as futile. Human nature being what it is, it’s silly to expect humility from a highly privileged elite. So if you think our society needs more humility, you should support policies that would reduce the elite’s privileges.

    Posted by on Friday, September 26, 2014 at 12:24 AM in Economics, Income Distribution | Permalink  Comments (47)


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